Competition regulator mostly backs lower airline price caps at Heathrow

by | Sep 8, 2023

(Sharecast News) – The UK competition regulator has said that the Civil Aviation Authority (CAA) made some errors in determining the lower price cap that Heathrow should charge airlines, but said that most of its calculations had been correct.
The ruling, by the Competition and Markets Authority (CMA), is expected to have only a “small net impact” on the price cap, the regulator said on Friday, which will come as a blow to both Heathrow Airport Limited (HAL) and a number of airlines that appealed the proposed new fees.

“Where we have provisionally found that the CAA has made errors, we have provisionally decided to require the CAA to reconsider them,” the CMA said.

“While it is not possible now to quantify any changes in the price cap that could result from CAA reconsideration of these aspects, we would expect any such changes to have only a small net impact relative to the CAA’s overall price control decision, particularly as they may work in opposite directions.”

The CMA now has until 17 October to decide whether to allow or dismiss the appeals.

HAL is regulated by the CAA, which sets the maximum charge per passenger that HAL is allowed to charge airlines for using the airport. Every few years the CAA sets this price control to make sure charges aren’t overly high but high enough to allow HAL to finance its current and future activities.

Back in March, the CAA declared that the average charge per passenger that airlines must pay Heathrow should be cut to £25.43 between 2024 and 2026, down from £31.57 this year.

HAL and airlines British Airways, Delta Air Lines and Virgin Atlantic had appealed the CAA’s decision. HAL complained that the cut would limit investment, while the airlines said the cuts didn’t go far enough – with both parties arguing that the price control limit was not in the interests of consumers.

“Many of the issues in these appeals had, as a common theme, the extent to which HAL and its investors should be relieved of bearing the costs of the COVID-19 pandemic and related restrictions on air travel – with airlines and their customers consequently bearing a greater share of those costs by way of higher airport charges – as well as who should bear the risks of any future major downward shocks in passenger numbers,” the CMA explained.

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